Pension Savings: Annual Allowance Calculator
HMRC have released a pension savings annual allowance calculator to work out pension savings and unused annual allowance.
The calculator can be accessed from HMRC’s website (go to: http://hmrc.gov.uk/tools/pension-allowance/index.htm) and can be used to work out the total amount of pension savings to a final salary pension, money purchase pension, or AVC scheme (or any combination of these). The calculator will work out whether pension savings into registered pension schemes have exceeded the annual allowance (currently £50,000) and, if not, the amount of any unused annual allowance.
The annual allowance is the maximum pension savings that can be made each year that can benefit from tax relief. Included in the figure are contributions both from the individual and anyone else, eg an employer. If pension savings exceed the annual allowance there is a tax charge (the annual allowance charge) on the excess.
What the calculator does not do is work out the amount of tax relief an individual will get on their own savings to registered pension schemes. Relief for the individual’s own contributions is restricted to the higher of 100% of relevant earnings and £3,600 (but subject to the further restriction that the total amount of all pension savings, including personal contributions, cannot exceed the annual allowance). The amount of tax relief on the individual’s own contributions will depend on that individual’s marginal tax rate.
28 February 2012